We already have a lot of tech that will help address the climate crisis — but we aren’t always great and funding and scaling it.
London-based Tangible, which is today announcing a £4m fundraise, says it can help. The startup, founded in 2021, helps companies building climate hardware — such as gigafactories, emobility providers and heat pump manufacturers — to access the deep-pocketed debt markets that they require to scale.
“It’s really critical, from a climate perspective, that more hard-asset businesses get funded,” says Will Godfrey, cofounder of Tangible. “It’s about a partnership between the equity and debt markets.”
Tangible’s fundraise comes from Future Positive Capital, Hardware Club VC, MMC, Blackwood, and Systemiq. Godfrey cofounded the company alongside Sebastian Abdy Saboune — the two worked together at Founders Factory previously.
An $9.2tn gap
A recent study suggested that, to achieve net-zero emissions by 2050, we need to channel $9.2tn into physical assets. It’s a topic set to take centre stage at this year’s UN climate conference, COP29, which began in Azerbaijan on Monday.
Funding asset-heavy, capital-intensive climate hardware often means moving away from dilutive equity funding and towards the debt markets.
And for founders, raising debt often requires an entire mentality shift. Debt investors will want to talk about risk and negative downside scenarios, which presents a mindset shift for founders used to waxing lyrical about their growth potential, Godfrey says.
How Tangible works
Tangible’s platform helps companies to model the debt deals they’re considering pursuing.
“Any asset operator who wants to raise structured debt can use the platform as a sandbox to simulate and plan the structure for their deal,” Godfrey says, explaining that it helps them work out how much they’d need to pay to the lender, what the risk is and the terms of the transaction.
Tangible’s platform can also pair asset operators with lenders. There are 28 banks on the platform at present, as well as a growing number of private debt providers — smaller investors who are willing to take an earlier risk than an investment bank.
Once a company has signed a debt deal, Tangible’s platform then analyses the legal document — which Godfrey says can often be 500 pages — and the rules set up to govern the special purpose vehicle (SPV). Companies tend to structure debt deals using an SPV so the debt doesn’t sit directly on their parent company’s balance sheet.
Asset operators have to report regularly to their lenders with different metrics, and Tangible’s platform connects a company’s data and automates the process.
Rise of debt in climate tech
Although there’s still a financing gap for climate hardware, an increasing number of companies are managing to secure debt vehicles.
Northvolt and H2 Green Steel, two of Europe’s best-funded climate tech startups, have raised chunky debt vehicles from some of the world’s biggest banks, like Barclays and Bank of America. Another example is German solar startup Enpal, which secured a €1.1bn debt vehicle earlier this year.
“It’s a really interesting debt environment at the moment,” says Godfrey. “The interest rates are dropping, which means that funds are yield hunting, meaning that they go after higher risk items that they can gain a bit more interest on.”
At the same time, more established areas of startup lending like fintech have become more saturated, meaning the yield to be found in those areas is lower.
“A lot of the funds have started to launch green funds and hard-asset funds because they see that as the next opportunity,” he says.
There is, however, the chance that debt providers will start thinking a bit harder before backing capital-intensive climate tech companies going forward, after companies like Northvolt and flying electric flying taxi startup Lilium have struggled to meet their targets.
Tangible will hope that these stutters don’t put the market off, as it builds the tech to help some of Europe’s most ambitious companies reach escape velocity.
Read the orginal article: https://sifted.eu/articles/tangible-climate-hardware-debt-raise-news/
